Moody's Investors Service said it has upgraded the state of Wisconsin's general obligation rating to Aa1.
The state's appropriation backed debt was also upgraded, as follows: to Aa2 for certificates of participation issued under the state's master lease program; Aa2 for general fund annual appropriation bonds; Aa2 for taxable pension funding bonds; Aa3 for appropriation revenue bonds; Aa3 for Milwaukee Public Schools revenue bonds Series 2007A and A1 for Milwaukee Public Schools revenue bonds Series 2013A.
The short-term P-1 ratings on the state's general obligation commercial paper programs were affirmed based on the bank counterparty ratings and the long-term underlying state rating.
The outlook for all the long-term ratings was moved to stable, Moody’s said.
The upgrade to Aa1 reflects the proven fiscal benefits of the state's approach to granting and funding pension obligations when many other states are experiencing stress from rising costs and heavy liabilities; an economy that delivers steady but moderate growth; conservatively managed budgets; and adequate liquidity, the rating agency said.
Despite Wisconsin's slightly elevated debt levels, its fixed costs for pensions, debt and retiree health benefits are below the median for Aa1 states and outweigh the credit challenge of the state's negative unassigned fund balances, according to Moody’s. Appropriation debt is notched off the state's GO rating to reflect risk of non-appropriation since the state is not obligated to appropriate debt service for the bonds.
The certificates of participation, general fund annual appropriation bonds, and taxable pension bonds are upgraded to Aa2, one notch lower than the state GO rating, Moody’s said, to reflect their average legal structure and essential nature of the projects funded.
The appropriation revenue bonds funded a sports facility, which the agency views as a less essential purpose warranting an upgrade to Aa3, two notches off the state rating. The Milwaukee Public Schools revenue bond Series 2007A is upgraded to Aa3, two notches off the GO to reflect the moral obligation of the state to make debt service payments on the bonds. The Milwaukee Public Schools revenue bonds Series 2013A is upgraded to A1, three notches lower than the GO rating to reflect weak legal provisions, Moody’s said.